Correlation Between Indian Metals and Arrow Greentech

Can any of the company-specific risk be diversified away by investing in both Indian Metals and Arrow Greentech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Indian Metals and Arrow Greentech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Indian Metals Ferro and Arrow Greentech Limited, you can compare the effects of market volatilities on Indian Metals and Arrow Greentech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Indian Metals with a short position of Arrow Greentech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Metals and Arrow Greentech.

Diversification Opportunities for Indian Metals and Arrow Greentech

0.29

Correlation Coefficient

Indian Metals  Arrow Greentech

Modest diversification

The 3 months correlation between Indian and Arrow is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Indian Metals Ferro and Arrow Greentech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Greentech and Indian Metals is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Indian Metals Ferro are associated (or correlated) with Arrow Greentech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Greentech has no effect on the direction of Indian Metals i.e., Indian Metals and Arrow Greentech go up and down completely randomly.

Pair Corralation between Indian Metals and Arrow Greentech

Assuming the 90 days trading horizon Indian Metals Ferro is expected to generate 0.71 times more return on investment than Arrow Greentech. However, Indian Metals Ferro is 1.41 times less risky than Arrow Greentech. It trades about 0.22 of its potential returns per unit of risk. Arrow Greentech Limited is currently generating about 0.03 per unit of risk. If you would invest  63,785  in Indian Metals Ferro on September 4, 2024 and sell it today you would earn a total of  23,325  from holding Indian Metals Ferro or generate 36.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Indian Metals Ferro  vs.  Arrow Greentech Limited

Indian Metals Ferro

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Metals Ferro are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arrow Greentech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Greentech Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Arrow Greentech is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Indian Metals and Arrow Greentech

The main advantage of trading using opposite Indian Metals and Arrow Greentech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Metals position performs unexpectedly, Arrow Greentech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Arrow Greentech will offset losses from the drop in Arrow Greentech's long position.

The idea behind Indian Metals Ferro and Arrow Greentech Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.